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First home buyers looking for a foot on the ladder in Auckland's overheated property market will be offered homes in a new affordable housing development south of the city.

The project will see 36 affordable homes built on sites in Pukekohe and Papakura in a wider subdivision of about 360 homes. The sites are caught by the Government's special housing areas legislation, meaning at least 10 per cent of completed houses must be sold in the affordable range - currently less than $578,250.

Under the legislation, the properties are only allowed to be sold to first-home buyers who are New Zealand citizens.

The new homes will be three-bedroom brick and tile houses built by GJ Gardner Homes on smaller sites of 200-260sq m.

The project's development manager, Eddie de Heer, told the Herald construction on the first stage would begin with months. Stage three was set to get underway later this year or early next year.

The $578,250 price cap is the maximum allowed under the special housing area legislation, which stipulates that prices cannot exceed 75 per cent of Auckland's median house price. However this would put the new homes over the current $550,000 price cap for the KiwiSaver HomeStart grant and Welcome Home mortgage scheme, which are designed to help first home buyers into their first property.

However, de Heer said building new homes within the price cap limit was virtually impossible and the limit needed to be adjusted for the Auckland market.

"If it's new it might be a one-bedroom apartment but that's about it."

The Herald revealed this week that Minister of Building and Housing Nick Smith is set to announce moves to lift house price limits for KiwiSaver subsidies and low-deposit home loans to help beleaguered first home buyers who can't afford an Auckland house.

Latest QV figures show the average Auckland home is now worth nearly $1 million.